According to projections by the Ministry of Finance, the tweak that will have the biggest impact on the budget relates to employee stock options. Currently, employees who receive stock options from their employer can participate in the plan without ever actually owning shares in their employer; in particular, the employer can “cash out” their employee’s stock options. The tax implications for such a transaction are as follows: the employee is effectively taxes stock options at a capital gains rate by virtue of the stock option deduction, while the employer receives a deduction for the amount paid to the employee.

The budget proposes to limit the deductibility of such payments by the employer by forcing the employee to elect whether they want to receive the stock option deduction when their employer “cashes out” their stock options. If the employee elects to receive the deduction – which will generally be the case – the employer will not be able to deduct the payment of the cash-out.

For more information on the various tax measures in the budget, click here.